Basis has plummeted in some areas—corn is 50¢ under nearby futures in northwestern Illinois, for example. The reason could be elevators face storage issues. They are still looking to blend off last year’s less-than-ideal-quality corn, while strong carry in the futures market (stronger prices later) is encouraging storing wheat. Meanwhile, new-crop corn is expected to start rolling in from the field in little more than a month. “Once again, on-farm storage likely will be a big money maker,” says Jerry Gulke of the Gulke Group.
The Eastern Corn Belt is used to dealing with spot surpluses at harvest time, and has tools in place to help handle it, says Diana Klemme of Grain Services Corp. in Atlanta, a consultant to elevators. She sees more potential issues along the western edge of the Corn Belt. “As corn production has replaced wheat in the Dakotas, Kansas and Nebraska, storage capacity has had a hard time keeping up. I’m hearing that country elevators that have been empty for years are full now. This is a trend—not a one-year situation. Both farmers and commercial elevators are building storage, but that takes time.”